The following present value factors are provided for use in this problem. $\begin{array} { | l | l | l | }
\hline \text { Periods } & \text { Present value of } \mathbf { \$ 1 } \text { at } \mathbf { 8 \% } & \text { Present value of an annuity of } \mathbf { \$ 1 } \text { at } \mathbf { 8 \% } \
\hline 1 & 0.9259 & 0.9259 \
\hline 2 & 0.8573 & 1.7833 \
\hline 3 & 0.7938 & 2.5771 \
\hline 4 & 0.7350 & 3.3121 \
\hline
\end{array}$
Xavier Co. wants to purchase a machine for $37,000 with a four-year life and a $1,000 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are
$12,000 in each of the four years. What is the machine's net present value?
A) $3,480.
B) $(3,480).
C) $40,480.
D) $(2,745).
E) $2,745.

Question

The following present value factors are provided for use in this problem. $\begin{array} { | l | l | l | } 
\hline \text { Periods } & \text { Present value of } \mathbf { \$ 1 } \text { at } \mathbf { 8 \% } & \text { Present value of an annuity of } \mathbf { \$ 1 } \text { at } \mathbf { 8 \% } \
\hline 1 & 0.9259 & 0.9259 \
\hline 2 & 0.8573 & 1.7833 \
\hline 3 & 0.7938 & 2.5771 \
\hline 4 & 0.7350 & 3.3121 \
\hline
\end{array}$
Xavier Co. wants to purchase a machine for $37,000 with a four-year life and a $1,000 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are
$12,000 in each of the four years. What is the machine's net present value?
A) $3,480.
B) $(3,480).
C) $40,480.
D) $(2,745).
E) $2,745.

Quizplus · Accepted Answer

The correct answer is A. The net present value of the machine is $3,480. This is calculated by taking the present value of the expected year-end net cash flows and subtracting the initial investment. The present value of the expected year-end net cash flows is $40,480. This is calculated by multiplying each year-end net cash flow by the present value factor for the corresponding year. The initial investment is $37,000. Therefore, the net present value of the machine is $40,480 - $37,000 = $3,480.

The Following Present Value Factors Are Provided for Use in This